Independent public policy group reviews Utah welfare expenditures

The total included the expenditures allocated by the state to fund Medicaid, CHIP, WIC, food stamps, and numerous other programs, according a report recently released by Utah's legislative fiscal analyst office.

State expenditures for welfare programs accounted for nearly one-quarter of Utah's entire budget.

Medicaid represents state government's single largest welfare program, indicated the latest data compiled by the Utah Taxpayers Association researchers.

Medicaid accounted for nearly two-thirds of the state's total welfare expenditures in FY-2008.

Utah Department of Health allocations, almost entirely for Medicaid, constituted the state's largest single welfare expenditure at 67 percent, followed by workforce services at 17 percent and human services at 10, noted the independent public policy organization analysts.

The United States government funds approximately 70 percent of Utah's welfare spending, continued the taxpayers association.

Two-thirds of the health department's welfare expenditures were covered by federal funding.

In 2008, Utah received about $2.5 billion in federal funds, with $1.9 billion earmarked for state welfare programs. Excluding welfare expenditures, federal funds accounted for 7 percent of Utah's total expenditures.

Numerous state and local leaders have a tendency to consider federal revenues as "free" money, pointed out the independent public policy organization. The leaders argue that if Utah's state and local governments don't spend the money, other states will.

But there are at least two problems with the perspective, indicated the taxpayers association.

First, Utahns pay federal taxes. Therefore, like all Americans, Utahns are interested in making sure federal taxes are spent efficiently.

Second, one major threat to Utah's prosperity is the massive federal deficit, which will probably worsen as baby boomers retire, indicated the independent public policy organization Most likely, the federal government will have to slow the growth in funding for state programs in order to alleviate federal deficits and Utah taxpayers will have to make up the difference.

Some legislators and organizations want to include a "tax expenditure report" as part of the state government welfare expenditure report. A tax expenditure report would list all tax deductions, exclusions, credits, and exemptions.

Spending groups argue that tax exemptions, credits, deductions, and exclusions are really forms of government expenditures. In other words, if government lets taxpayers keep more of their own money by exempting 45% of a primary residence valuation from property tax, this is really no different than if government had written out a check to each homeowner.

While a summary of tax base reductions is not a bad idea (the Tax Commission already lists most exemptions in its various reports), and while some tax base reductions are not easily justified, equating tax exemptions with government expenditures is problematic.

First, reductions in the tax base such as deductions, credits, exclusions, and exemptions are offset by increases in tax rates.

What government gives with one hand, it takes away with the other hand. While tax rates may not immediately increase as exemptions are granted, in the long run government usually raises rates to offset the reduction in revenue. One of the biggest tax reform mantras is "expanding the base and lowering the rates."

Second, equating base reductions with government expenditures would allow politicians to incorrectly claim that they were not increasing taxes and the size of government by eliminating deductions and credits. For example, government revenues would increase by nearly $900 million per year if the primary residential property tax exemption were eliminated and property tax rates were not reduced. However, using the "tax expenditure" logic, the spending lobby would argue that eliminating the exemption would be revenue neutral since the increased revenue would be offset by eliminating the 45% exemption "tax expenditure".

"We've generally supported broad tax bases (and lower tax rates), but we've never argued that reductions in tax bases are the same as if the state had actually spent these dollars directly in government programs.